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PETITIONER: UNION OF INDIA [RAILWAY BOARD] & ORS.

       Vs.

RESPONDENT: J.V. SUBHAIAH & ORS. ETC. ETC.

DATE OF JUDGMENT15/12/1995

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. FAIZAN UDDIN (J) KIRPAL B.N. (J)

CITATION:  1996 SCC  (2) 258        JT 1995 (9)   488  1996 SCALE  (1)193

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T Ramaswamy, J.      Leave granted in all the special leave petitions.      The respondents  were admittedly  appointed in  Railway Employees’  Consumer  Co-operative  Stores  at  Rajahmundry, Visakhapatnam, Vijianagaram and Dharmavaram in South-Central Railway. They  filed  different  O.As.  before  the  Central Administrative  Tribunal   [CAT],  Hyderabad  Bench  seeking declaration that  they are  "regular  Railway  employees  in Class III  posts" and entitled to be paid regular salary for continuous  service   from  the   date  of   the  respective appointments  in   the  Societies   and  also  consequential promotion, increments  and payment of arrears of salary. The CAT, Hyderabad  Bench following  the decision  of the Madras Bench delivered  on June  29, 1990  in O.A.No.305/88 allowed the O.As.  and gave  the directions for grant of the reliefs referred to earlier but payment of salary was directed to be made from  the date  on which  respective applications  were filed. By  the time the present Special Leave Petitions came to be  filed, a two-Judge Bench of this Court by order dated September 7,  1994 made  in C.A.  No.2932/91  confirmed  the order of  the CAT,  Madras Bench but the review petition was pending. When  these appeals  had come  up  for  hearing  on October 16,  1995 it was pointed out to another Bench by the Additional Solicitor  General that despite the dismissal the matter required  examination and  for that reason notice was already issued  in another  case, viz., C.A. @ SLP 24287/95. All the  matters were accordingly tagged together. After the dismissal of  the review petition a two-Judge Bench by order dated November  13, 1995  referred the matter to this Bench. Thus these appeals by special leave.      The  admitted  facts  are  that  the  respondents  were appointed by  the  respective  Railway  Co-operative  Stores registered under  the Andhra  Pradesh Co-operative Societies

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Act, 1964  as amended  from time  to time.  The Co-operative Stores were  organised  by  the  Railway  Administration  as social welfare  measure to  inculcate thrift and cooperative spirit in  the management  of the societies, distribution of essential commodities  and lending of credit facilities etc. to  the  members  of  the  societies.  Under  the  bye-laws, respective societies  consist  of  serving  members  of  the Railway Administration  at the  respective places.  Normally these societies  are formed  at railway  junctions. They are organised under  the  instructions  issued  by  the  Railway Administration in  the Railway  Establishment  Manual  [non- statutory orders].  Working of  the societies are supervised by  the   welfare  officers   appointed   by   the   Railway Administration. It  is in  dispute as to whether salaries to welfare officers  are paid  by the societies concerned or by the Railway  Administration but  that is  not  material  for disposal of  these appeals.  It is  also not in dispute that one third  of the  members of the societies are nominated by the Railway Administration.      Shri  Tulsi,   learned  Additional   Solicitor  General contended, on the facts, that Co-operative Stores registered under the  Co-operative Societies  Act, a  State Act and the articles of association or the bye-laws of the societies are sanctioned by  the Registrar  of Co-operative Societies [for short, "the  Registrar"] of the concerned State appointed by the State  Government under  the respective  State Acts. The constitution of  the societies  is regulated  and registered under the  State Act.  Appropriate law,  rules and  bye-laws provide that  the General  Body of  the society periodically elects the members of the committee which in turn elects the President or general body itself elects the President, for a specified term. The President and the committee, as the case may be,  is empowered to appoint the officers, employees and servants of  the  Stores  according  to  its  bye-laws.  The Registrar under  the respective  Acts, has  supervision  and control over the working of the societies and its employees. In case  of dispute  between the  society and its members or the society  and its  officers or  employees,  the  same  is resolved  by   an  arbitrator   under  the  Act  and  appeal thereunder is  provided to  a  Tribunal  constituted  or  an appellate forum specified. The jurisdiction of a civil court stands excluded in respect of the said disputes. Salaries to the staff  are paid  by the  society. Railway  Establishment Manual prescribes  procedure for organisation of the welfare activities, one of which is establishment of consumer credit co-operative societies  or  house  building  societies.  The share capital,  though  deducted  from  the  salary  of  the member-employees, is  only by  way of  an amenity  to enable them to  organise, as a co-operative movement, for self-help and  thrift.   The  Administration   has  no   control  over selection, appointment  and payment of salaries to the staff of the  society. No  qualifications are  prescribed in  that behalf. It  is  due  to  administrative  exigencies  of  the concerned  Stores  or  the  Societies  that  appointment  or dismissal can  be made by the President/committee as per the procedure prescribed  under the respective Acts or the Rules or   bye-laws   made   thereunder.   Thereby   the   Railway Administration has  no managerial  or administrative control over the  staff of  the Stores/Societies.  The conditions of service of  the officers  of the  Railway Administration are not applicable  to them. If the Society is liquidated by the Registrar  for   its  mismanagement  the  employees  of  the Societies seek  the remedy  only against  the Societies. The societies have  not been impleaded as respondents. The ratio in M.M.Khan  & Ors.  v. Union  of India & Ors. [(1990) Supp.

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SCC  191]   cannot  be  applied  to  the  employees  of  the Societies/Stores. The  rent-free accommodation and provision of electricity  to the  Stores and medical facilities to the employees are  extended as  a part  of the  welfare  measure without creating  an obligation  on the  part of the Railway Administration  to  treat  them  as  Railway  employees.  In M.M.Khan’s  case   recognised  cooperative   canteens   were organised as  a part  of the statutory duty under Section 46 of the  Factories Act  where employees  are 100  or above in number but  below  250.  The  ratio  laid  down  therein  is inapplicable to  the facts of these appeals. Shri K. Madhava Reddy, learned  senior counsel  and Mrs. Chandan Ramamurthy, learned counsel for the respondents contended that the ratio of M.M.Khan’s  case applies  on all  fours to  the facts  of these  appeals.   Co-operative  Stores/Societies  have  been organised at  the instance  of the  Railway  Administration. Their work  is controlled  and  supervised  by  the  Welfare Officer appointed  by the Railway Administration and subsidy is being  paid by the Railway Administration. The society is merely an  intervening agency  or veil  between the  Railway Administration  and   the  employees   of  the   Cooperative Stores/Societies.  The   Railway  Administration  admittedly gives facilities  like railway  passes, quarters  on nominal rent, free  medical aid  and other  amenities given  to  the regular officers  and servants of the Railway Administration from time  to time.  The Railway Board issues circulars from time to  time to control, organise and supervise the working of the  Stores. The Railway Establishment Manual itself is a complete code  in that  behalf. Merely  because the  Railway Administration  kept  its  arms  as  an  intervening  agency between the  Stores and  the employees, it cannot disown its liability  to   treat  the   employees  appointed   by   the Stores/Societies [like  canteen cases] as its employees. The decision of the Madras Bench of the CAT since upheld by this Court in  an appeal  and review  petition also  having  been dismissed, the  employees appointed by the respective Stores in Southern  Railway and  South-Central Railway form a class discharging the  same  duties.  Therefore,  the  respondents cannot be  denied their  Constitutional right  to have equal treatment as  had by  the regular  Railway  employees.  Smt. Chandan Ramamurthy  placed strong  reliance on  yet  another decision of  a two-Judge  Bench of  this  Court  in  Parimal Chandra Raha & Ors. v. Life Insurance Corporation of India & Ors. [(1995) Supp. 2 SCC 611].      In view of the respective contentions a question giving rise to  far-reaching consequences  emerges for  decision in these  appeals.   The  question  is  whether  the  officers, employees  and   servants  appointed   by   a   Co-operative Society/Stores registered  under the  Co-operative Societies Act of  a State  or Societies  Registration Act  (for short, ‘the  Society’)  and  organised  as  a  welfare  measure  to inculcate co-operative  movement, self-help and thrift among the officers  and servants of Railway Administration, can be declared  to   be  regularly  appointed  Railway  employees? Whether they are Railway employees defined under the Railway Establishment Manual  and entitled  to all the consequential benefits?  Before  adverting  to  the  instructions  in  the Railway Establishment  Manual, it  would  be  profitable  to consider the  legal  setting  of  the  appointments  of  the employees and  servants of  the Society.  In this case since admittedly the  A.P. Co-operative  Societies Act [7 of 1964] (for short  ‘the Act’)  is applicable, its provisions and of the predecessor  Acts repealed  thereunder and  of the Rules made thereunder as amended from time to time and bye laws of the society are required to be examined. The Act was enacted

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with a  view to  encourage co-operative  movement, inculcate thrift and  self-help  and  to  organise  the  societies  on democratic lines. The right to form a society is a statutory right and  is not  a fundamental right, a Society registered under Section  7, on  compliance with  and conforming to the requirements  laid   down  therein   and  the   rules   made thereunder,  is  a  body  corporate  under  Section  9.  The Registrar is  empowered under  Section 15 to divide the area of operation  of the  Society or  amalgamate  Societies  for their day  to day  better working. The amendment to the bye- laws shall be approved by the Registrar and registered under Section 16.  The rights  and liabilities  of the members are regulated in  Chapter III  subject to Section 21. Section 19 regulates  the   eligibility   of   a   member   and   other qualifications. Section  21 prescribes  disqualification for membership  of   the  Society.   Section   21-A   prescribes disqualification for  membership of  the  committee  of  the society. Section  21-AA envisages cessation of membership of a  committee  and  the  reinstatement  under  Section  21-B. Election and  the right  to vote is regulated by Section 25. Management of the society is regulated by Section 30.      The ultimate  authority of  the Society  vests  in  its general body vide Section 30 (1) (a). It would be subject to the other  provisions of  the Act and the Rules and bye-laws made thereunder.  Section 31  prescribes the  procedure  for constitution  of   a  committee   and   their   duties   and responsibilities etc.  Section 32  prescribes procedure  for holding  general   body  meeting  of  the  Society  and  the committee and sub-section (4) thereof empowers the Registrar to appoint  a Special  Officer  with  remuneration  for  the management of  the  committee.  Section  37,  with  an  non- obstante  clause   and  subject   to  the  execution  of  an agreement, empowers  the Society to deduct the share capital or any  amount from  monthly salary  or wages  payable to  a member of  the Society. The duration of elected body is five years. Chapter  VII consists of Sections 50 to 60 for audit, enquiry, inspection  and surcharge for the mismanagement and recovery of  the amounts found mismanaged or defalcated from the members  of the committee or the officers or servants of the Society. Chapter VIII deals with settlement of disputes. It consists  of Section 61 to 63. Sub-section (1) of Section 61 with  a non-obstante  clause provides  that  any  dispute touching upon  the constitution,  management or the business of the  Society other  than a dispute regarding disciplinary action taken  by the Society or its committee against a paid employee of the Society, shall be resolved by arbitration on a reference  under Section 62 and recovery of the monies due to it.  Chapter IX deals with winding up of and cancellation of the  registered Societies.  Liquidator gets  appointed to wind up  the Society.  Chapter X deals with execution of the decisions,  decrees  or  orders.  Chapter  XI  provides  for constitution of  a Co-operative Tribunal, appointment of the members of  the Tribunal,  appeal thereto,  revision to  the Registrar and  review of  the orders  had been  provided  in Sections 76,77  and 78.  Chapter XII deals with offences and penalties.      Section 79  (1) (a)  provides  that  "it  shall  be  an offence under  the Act, if a committee, an officer, employee or any  member of the society willfully makes a false return or  furnishes  false  information,  on  a  lawful  order  or direction issued"  under the  Act. Clause (aa) provides that "if the committee, an officer, employee or any member of the society furnishes  false information to gain admission or to continue as  member of a society etc., it/he shall be liable for prosecution  as envisaged  under the Act. Special Courts

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are empowered to take congnizance and try an offence against the officers etc. constituted under Section 83-A.      Section 116-A with a non-obstante clause gives power in Chapter IVX  to the  Registrar to  constitute a common cadre for  the  categories  of  employees  for  certain  societies enumerated thereunder. Section 116-AA equally gives power to him  to   abolish  the   centralised  services  for  certain categories  of   employees.  Section   116-C  empowers   the societies with  prior  approval  of  the  Registrar  to  fix staffing  pattern,   qualifications,  pay-scales  and  other allowances. In  case of  a society  receiving financial  aid from the  Government, appointment  or removal  of the  Chief Executive of  the society  by whatever  name called  of  any society should  be made  only with the prior approval of the Registrar as  per sub-section  (2) of Section 116-C. Section 121 bars  the jurisdiction  of courts  and provides  that no order, decision  or action  taken or  direction issued under the Act  by an arbitrator, liquidator, Registrar or Tribunal etc, shall  be liable to be called in question in any court. The rights  and liabilities  are subject  to  the  bye-laws, Rules and  the Act.  The  Society  owes  its  existence  and continuance by  its efficient  and proper  management by the Committee assisted  in  its  day-to-day  management  by  its staff.      Rules 28  and 29 of the Co-operative Societies Rules of 1964 [for short, "the Rules"] provide as under:      "28. Officers and servants of societies:      -  (1)  No  society  shall  appoint  any      person as its paid officer or servant in      any  category   of  service,  unless  he      possesses    the    qualification    and      furnishes the  security as  specified by      the Registrar,  from time  to time,  for      such category  of service in the society      or for  the class  of societies to which      it belongs.      (2) No  society shall  retain in service      any paid  officer or servant, if he does      not, acquire  qualifications, or furnish      the security, as is referred to sub rule      (1) within  such time  as the  Registrar      may direct.      (3)  The   Registrar  may,  for  special      reasons, relax  in respect  of any  paid      officer or  servant, the  provisions  of      this   rule    in    regard    to    the      qualifications he  should possess or the      security he should furnish.      (4) No society shall appoint as its paid      officer or  servant in  any category  of      service any person who is related to any      director or member of the committee of a      financing bank  to which  the society is      affiliated   except   with   the   prior      approval of the Registrar.      (5) Notwithstanding  anything  contained      in   the    bye-laws/special   bye-laws,      service  regulations   or  common  cadre      regulations    of    the    co-operative      societies,  every   paid   servant   and      officer of  a society,  other than those      in the  last grade service, shall retire      from service  on the  afternoon  of  the      last date  of  the  month  in  which  he      attains the age of 58 years.

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    29.  Appointment  of  Secretary:-  Every      financing  bank,  every  credit  society      with limited  liability  and  a  working      capital of not less than Rupees one lakh      shall appoint a paid secretary. The paid      secretary  shall   be  disqualified  for      being appointed  as,  and  for  being  a      member of the committee of the financing      bank, the society or the mortgaged bank,      as the case may be:"      A conspectus of these provisions would clearly indicate that registration of the society, election to the committee, the term  thereof, rights and liabilities of the members and office bearers are regulated under the Act. Power to appoint officers, employees  and servants of the society is given to the President  or the  committee, as  the case may. They are regulated by  the bye-laws, Rules and the Act. Their service conditions are  regulated by  those  provisions  with  prior approval of  the Registrar. A sample bye-laws of the society relating to  the Consumer  Stores at  Rajahmundry  has  been placed before  us. It  shows  that  under  bye-law  19,  the management of  the affairs  of the  society, subject  to the resolutions passed  from time to time by the general body or the committee from time to time, "shall vest in the managing committee". Under  bye-law  20,  the  general  body  elects, amongst themselves,  a President,  a Secretary, an Assistant Secretary. Under  bye-laws 23,  subject to  the  resolutions passed by  the managing committee from time to time, several officers of  the society shall have the powers to manage the society as  enumerated thereunder.  Sub-bye-law (2)  thereof provides that  Society shall  appoint a  paid  Manager  who, among other things, shall be responsible to carry on day-to- day work  of the  society on sound lines. Under sub-law (3), the managing  committee is  empowered to prescribe from time to time the strength of the establishment of the society and the scales  of pay  and allowances admissible to each member appointed by  the President.  Under  sub-law  (3)  (c),  the President shall  have the  power to fine, suspend or dismiss the members  of the  establishment. Except  in the  case  of fine, an  appeal shall  lie to  the Committee  against every order awarding  a punishment by the President. Under bye-law 27 (2),  no officer  or servant shall remain in any category of service  in the  Society, if he does not furnish security as prescribed  by the  Registrar. The other bye-laws are not relevant for the purpose of these cases.      It would  thereby be  clear that the power to prescribe strength of  the establishment  appointment of  the staff of the Society, its officers, employees and servants, and their scale of  pay are  regulated by bye-laws, Rules and the Act. Disciplinary  control   lies  with  the  President  and  the Committee. The  disciplinary action against its employees is excluded from  the arbitration  proceedings, by operation of Section 60.  For offences etc. are prosecuted under the Act, the jurisdiction of the civil court is excluded. Appointment of the  officers, employees  and servants  of the Society is regulated by  the provisions  of the Act, Rules and the bye- laws as  self-contained scheme  and code. The Society enjoys autonomy as  a body  corporate subject  to the provisions of the Act,  Rules and  bye-laws. It  enjoys exclusive power to appoint and  keep disciplinary control over the staff in its establishment. The  tenure is subject to bye-laws, Rules and Act and  law so long as the Society is not liquidated as per law. In  Co-operative Central  Bank  Ltd.  &  Ors.  etc.  v. Additional Industrial  Tribunal, Andhra  Pradesh,  Hyderabad [(1969) 2  SCC 43]  this  Court  had  held  that  Industrial

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Disputes Act  would apply  to the  employees appointed under the Act by the Co-operative Central Bank. It would, thereby, be  clear   that  appointments   of   the   staff   of   the establishment,  control   and   disciplinary   actions   are regulated under the provisions of the Act, the Rules and the remedies provided under law.      The question,  therefore, emerges whether the officers, employees and  servants appointed  by  Co-operative  Society organised under  the Railway  Establishment Manual  could be treated as  Railway servants.  Paragraph 10B  of the  Indian Railway Establishment Code defines "Railway Servant" to mean "a person  who is  a member of a service or who holds a post under the  administrative control  of the  Railway Board and includes a  post in  the Railway  Board". In  other words, a person must  be appointed to a service or a holder of a post under  the  administrative  control  of  the  Railway  Board including a  post in  the Railway  Board itself. Admittedly, respondents are  not members of the service nor do they hold post under  the administrative control of the Railway Board. They seek  party only  on the basis of the rule laid down by this Court in M.M. Khan’s case [supra].      Before dealing  with the  effect of  the ratio  of M.M. Khan’s case,  it would  be  appropriate  to  deal  with  yet another decision  rendered on the same day by the same Bench which was  argued in  the same batch but a separate Judgment was rendered,  viz., All  India Railway Institute Employees’ Association v. Union of India through the Chairman [(1990) 2 SCC 542] to which one of us, K. Ramaswamy, J., was a member. Therein the  question was whether the employees appointed in the institutes  or clubs maintained by the Railway employees as welfare  measure could be treated as Railway employees on par  with  Railway  canteen  employees  [statutory  or  non- statutory recognised  canteens]. This Court recognising that the  establishment   of  the  institutes  or  clubs,  though recognised by  the Railway,  was only a welfare measure, had held that  formation of  the institutes  or  clubs  was  not mandatory. They  are established  as a  part of  the welfare measure for  the Railway  staff and  the kind  of activities they conduct,  depends, among  other things,  on  the  funds available to  them. The  activities have  to conform  to the objects since  by their  very nature  the funds are not only limited but keep on fluctuating. The institutes or clubs and the benefits  that would  flow on  them will depend upon the budgetary provisions  for the  institutes and clubs and keep flowing from  time to  time. If the employees working in the institutes or  clubs are  recognised as Railway employees it will have  snow-balling effect  on other  welfare activities carried out  by the  Railway and  similar activities carried "on by  all other  organisations". In  the  light  of  those factual matrices, it was held that there was no relationship of employer  and employee between the Railway Administration and the  employees engaged  in  the  institutes  and  clubs. Neither law nor facts spell out such relationship.      In M.M.Khan’s  case [supra], establishment of a canteen was one of the mandatory requirements as a part of efficient Railway Administration.  Where the  employees  are  250  and above,  Section   46  of  the  Factories  Act  mandates  the industrial establishment to establish and maintain canteens. If the  employees are  100 and  above,  though  it  was  not mandatory but  maintenance of  a canteen  under the  Railway Establishment   Manual    is   a   part   of   the   Railway Administration. In  that factual  and  legal  setting,  this Court was to consider the effect of non-statutory recognised canteens registered under the Co-operative Societies Act and the staff appointed in those societies. It was held that the

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management of  the Societies  was controlled  by the Railway Administration by  appointing a  Chairman or  Secretary as a member  of   the  Society.   The  nominees  of  the  Railway Administration are  statutorily obligated  to bring  to  the notice of  the Railway Administration all the management and affairs of  the committee  which is  likely  to  affect  the interests of  the Railway  Administration in its capacity as the owner  of the  premises and furniture equipments etc. If the  decision  of  the  committee  is  likely  to  be  of  a considerable magnitude  it is  required to be brought to the notice of the Railway Administration. The General Manager of the Railway  has supervisory  control over the management of the committee as per the provisions contained in the Railway Manual. For  the purpose  of giving  subsidy for  wages, the rates of  pay and  allowances to the staff canteen employees are regulated  by the  Manual. Revision of the scales of pay and dearness  allowance to  the managing  committee was also regulated therein.  The  Railway  Administration  had  given directions from  time to  time to ensure compliance of those requirements.  This   Court  also   intervened  and  pending appeals, gave  directions to  pay to  the canteen  employees equal pay  on par  with regular  employees  of  the  Railway Administration and compliance was enforced by orders of this Court.  Their   service  conditions  are  regulated  by  the instructions.  The   employees  in  the  canteens  are  also entitled to  free medical  treatment as out-door patients in Railway hospitals  etc. In  the backdrop  of those facts and the Rules, this Court had held that the employees appointed, even in  non-statutory recognised  canteens registered under Co-operative Societies Act or the recognised canteens, would be entitled to claim the status of Railway servants.      Shri Madhava  Reddy, in  all  frankness  admitted  that there is  a dichotomy  of  dual  control  exercised  by  the Registrar under  the Act  and the  control  by  the  Railway Administration.  But   he  contends  that  since  the  staff appointed by the Co-operative Societies running canteens are treated  as  Railway  servants  the  same  ratio  should  be extended to  the employees  appointed  by  the  Co-operative Stores/Society since  this is also a welfare amenity totally controlled by  the Railway  Administration and  10 per  cent subsidy is also regularly given.      It  is   not  necessary   to  embark  upon  a  detailed examination into the instructions given in various paragraph Nos.2901 to  2909 in  chapter 29  of Railway  Manual (placed before us)  dealt with  by the  CAT,  Madras  Bench  in  its judgment. Suffice  it to  state that admittedly instructions have been issued to regulate the systematic organisation and management of  the Stores/Societies.  The Government,  as  a welfare measure,  gives 10  per cent  subsidy to  enable the Society to  manage its  affairs supervised  by  the  Welfare Officer of  the Railway Department. Employees become members of the  Societies by  contributing  towards  share  capital. Initial amount  is paid by the Railway Administration and is later  deducted  from  their  salary.  It  also  gives  free accommodation for  housing  the  Stores,  electricity,  free medical aid  in its  hospitals  to  those  employed  by  the Stores. In  the Manual  it is  specifically stated that they are entitled  to traveling passes when they go to attend the committee meetings.  Even otherwise  the facilities extended are optional  and  are  only  a  part  of  on-going  welfare measure.      It is  seen that  service conditions  of the employees, officers  and  servants  of  the  Stores/Societies  are  not regulated by  the Railway  Administration. They are governed by the  bye-laws of  the Societies  subject to  control  and

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sanction by  the  Registrar  under  the  State  Act  or  the relevant provisions.  There is  no obligation on the part of the Railway  Administration to  provide security  for  those employees. The disciplinary control by the Society concerned is subject  to other  laws and  is exclusively  domestic  in character. The  Railway Establishment Code is not applicable to them.  Their appointment is subject to bond prescribed by the Registrar.  The  arrears  of  funds  or  misappropriated amounts etc.  are recoverable  under the  provisions of  the State Act and the Rules made thereunder. The services of the staff are  liable to  termination in terms of the State Act, Rules and bye-laws.      In other  words, there is a dual control over the staff by the  Society and  the  Registrar.  In  that  behalf,  the Railway Administration  has no  role to play. If the subsidy is  considered   to  be   a  controlling   factor  and   the Societies/Stores as  an intervening  agency or  veil between the Railway  Administration  and  the  employees,  the  same principle  would   equally  be   extendible  to  the  staff, teachers,  professors   appointed  in   private  educational institutions   receiving    aid   from    the    appropriate State/Central Government  to claim  the status of Government employees. Equally,  other employees  appointed in other Co- operative   Stores/Societies    organised   by   appropriate Government would  also be  entitled to  the same  status  as Government servants.  Appointment to  a post  or  an  office under the  State is  regulated  under  the  statutory  rules either by  direct recruitment  or appointment  by  promotion from lower  ladder  to  higher  service  or  appointment  by transfer in accordance with the procedure prescribed and the qualifications specified. Any appointment otherwise would be vertical transplantation  into services  de hors  the rules. Appointment through  those institutions becomes gate-way for back  door  entry  into  Government  service  and  would  be contrary  to   the  prescribed   qualifications  and   other conditions and  recruitment by  Public Service Commission or appropriate agencies.  As contended, if the employees of the societies like  co-operative canteens  are  declared  to  be railway servants,  there would  arise dual control over them by the Registrar and Railway Administration but the same was not brought  to the  attention of the court when M.M. Khan’s case was decided.      It is  true that  the order  of the  two-Judge Bench of this Court  had upheld  the order  of the  CAT, Madras Bench which had  become final.  With due  and great respect to our learned brethren  constituting  the  Bench,  these  features noted by  us do  not appear  to have  been put  up for their consideration and  so they did not have occasion to consider the impact  as  envisaged  hereinbefore.  The  Bench  merely stated thus:      "... The Tribunal has examined in detail      Chapter  XXIX   of  the  Indian  Railway      Establishment Manual  and has  preferred      to paras  2901 to  2909.  Based  on  the      provisions of  the  Railway  Manual  and      taking  into  consideration  the  actual      working of  the Stores, the Tribunal has      come  to   the   conclusion   that   the      employees working  in  the  Co-operative      Stores are  in  fact  and  in  law,  the      employees of  the Railway Establishment.      We have  been taken through the judgment      of  the   Tribunal  and  other  relevant      material on  record. We  so no ground to      interfere with  the  reasoning  and  the

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    conclusion reached by the Tribunal..".      In view  of the  above discussion  and in  view of  the legal setting  referred  to  hereinbefore,  we  are  of  the considered view  that the  Bench had  not laid  down any law except approving the reasoning and conclusion reached by the Madras Bench  of  the  CAT.  The  Madras  Bench  had  merely referred to  the provisions  in the  Manual and proceeded on the premise that they gave rise to a legal base to treat the employees of  the  Stores  as  the  Railway  employees.  The reasoning  is  wholly  illegal  and  unsustainable  for  the reasons stated above.      The principle of equality enshrined under Article 14 of the Constitution, as contended for the respondents, does not apply since  we have already held that the order of the CAT, Madras Bench  is clearly  unsustainable in  law and  illegal which can  never form basis to hold that the other employees are invidiously  discriminated  offending  Article  14.  The employees covered  by the  order of  the Madras Bench may be dealt with  by the  Railway Administration appropriately but that could  not  form  foundation  to  plead  discrimination violating Article 14 of the Constitution.      We, therefore,  have no  hesitation to  hold  that  the officers, employees  and servants  appointed by  the Railway Co-operative Stores/Societies  cannot be treated on par with Railway  servants   under  paragraph   10B  of  the  Railway Establishment Code  nor they  can be given parity of status, promotions, scales of pay, increments etc. as ordered by the CAT, Hyderabad Bench.      The appeals  are accordingly  allowed and the OAs stand dismissed but, in the circumstances, without costs.